Handout Standard Costing

Standard Costing
Problem #1
The following data from Division X of Angela Aguas were gathered:
Costs Budget Actual

Sales P 480,000.00 P 470,000.00
Variable COGS 180,000.00 187,000.00
Fixed Manufacturing Cost 40,000.00 46,500.00
Variable Selling 38,000.00 30,000.00
Fixed Admin 20,000.00 22,000.00
Fixed Selling 50,000.00 53,000.00
Operating Income P ??? P ???
1. If the budget was prepared based on 2,000 units, and the actual units happen to be equal with the plan, what
is the total cost variance?
2. If the budget was prepared based on 2,000 units, and the actual units is 85% of the plan, what is the total cost
variance?
3. If the budget was prepared based on 2,000 units, and the actual units is 95% of the plan, what is the variance
on its operating income?
4. If the budget was prepared based on 2,000 units, and the actual units is 5% higher than the plan, what is the
variance on its operating income?
Problem #2
The Gold plant of Melbourne’s Small Motor Division produces a major sub-assembly for motorcycles. The
plant uses a standard costing system for production costing and control. The standard cost sheet for the sub-assembly
follows:
Direct materials (6 lbs. @ ₱6) ₱36

Direct labor (3 hrs. @ ₱12) 36
Variable overhead (3 hrs. @ ₱10) 30
Fixed overhead (3 hrs. @ ₱6) 18
Standard unit cost ₱120
During the year, the Gold plant had following actual production activity:
a. Production of sub-assemblies totaled 75,000 units.
b. A total of 415,000 pounds of materials was purchased at ₱5.80 per pound.
c. There were 16,400 pounds of materials in beginning inventory (carried at ₱6 per pound). There was no ending
inventory.
d. The company used 200,000 direct labor hours at a total cost of ₱2,560,000.
e. Actual fixed overhead totaled ₱1,413,000.
f. Actual variable overhead totaled ₱2,170,000.
The Gold plant’s practical activity is 80,000 units per year. Standard overhead rates are computed based on practical
activity measured in standard direct labor hours.
Requirements:
5. materials price variance
6. materials usage variance
7. labor rate variance
8. labor efficiency variance
9. variable overhead spending variance
10. variable overhead efficiency variance
11. fixed overhead spending variance
12. fixed overhead volume variance
13. controllable overhead variance
14. total overhead variance
Problem #3
NSW Company produces telephones. To help control costs, NSW employs a standard costing system and
uses a flexible budget to predict overhead cost at various levels of activity. For the most recent year, NSW used a
standard overhead rate at ₱18 per direct labor hour. The rate was computed using practical activity. Budgeted
overhead cost are ₱792,000 for 36,000 direct labor hours and ₱1,080,000 for 60,000 direct labor hours. During the past
year, NSW generated the following data:
a. Actual production: 100,000 units

b. Fixed overhead volume variance: ₱36,000 unfavorable
c. Variable overhead efficiency variance: ₱24,000 favorable
d. Actual fixed overhead costs: ₱380,000
e. Actual variable overhead costs: ₱620,000
15. Calculate the fixed overhead rate.

16. Determine the fixed overhead spending variance.
17. Determine the variable overhead spending variance.
18. Determine the standard hours allowed per unit of product.
19. Assuming the standard labor rate is ₱13 per hour, compute the labor efficiency variance.
Problem #3
Darwin Company uses a standard cost system. The standard cost card for one of its products shows the following
materials standards:
Materials Inputs Standard Quantity Standard Price per Kilo Total

A 20 kilos ₱0.70 ₱14
B 5 0.40 2
C 25 0.20 5
50 kilos ₱21
The standard mix should produce 40 kilos of finished products. Materials of 500,000 kilos were used as follows:
Materials Inputs Actual Quantity Actual Unit Price Total

A 230,000 kilos ₱0.80 ₱184,000
B 50,000 kilos 0.35 17,500
C 220,000 kilos 0.25 55,000
₱256,500
The output of the finished product was 390,000 kilos.
20. What is the materials price variance?

21. What is the materials mix variance?
22. What is the materials yield variance?
Problem #4
Valenzuela Plastics, Inc. has set a standard cost, ₱5.25 per unit for Material D and ₱12.25 per unit for Material
E. In June, Valenzuela bought 17,500 units of Material D and 8,750 units of Material E. All Material D, except 1,400
units, were bought at the standard unit cost. The 1,400 units had a unit cost of ₱6.15. Valenzuela bought 7,875 units of
Material E at standard cost and 875 units at a unit cost of ₱14.
In accordance with the standard, two units of Material D and one unit of Material E should be used to make
each unit of Product F. In January, 7,000 units of Product F were made, and 15,050 units of Material D were used and
7,175 units of Material E were used.
23. What is the materials price variance?

24. What is the materials mix variance?
25. What is the materials yield variance?
Problem #5
The Chicleros Co., Inc. manufacturer of chewing gum, uses a standard cost system. Standard product and
cost specifications for 1,000 lbs of chewing gum are as follows:
Quantity Price Cost
Gumbase 800 lbs P0.25/lb P200
Corn syrup 200 lbs 0.40/lb 80
Sugar 200 lbs 0.10/lb 20
Input 1,200 lbs P300 P0.25/lb
Output 1,000 lbs P300 P0.30/lb

Materials records indicate:
Opening Purchases Ending

Inventory In January Inventory
Gumbase 10,000 lbs 162,000 lbs @ P0.24 15,000 lbs
Corn syrup 12,000 lbs 30,000 lbs @ P0.42 4,000 lbs
Sugar 15,000 lbs 32,000 lbs @ P0.11 11,000 lbs
To convert 1,200 lbs of raw materials into 1,000 lbs of finished product requires 20 hours at P3/hour, or
P0.6/lb. Actual direct labor hours and cost for January are 3,800 hours at P11,552.
Factory overhead is applied on a direct labor hour basis at a rate of P5/hour (P3 fixed, P2 variable), or P0.10/lb.
Normal overhead is P20,000 with 4,000 direct labor hours. Actual overhead for the month is P22,000. Actual finished
production for the month of January is 200,000 lbs.
The standard cost per pound of finished chewing gum is:
Materials P0.30/lb
Labor 0.06/lb
Factory Overhead 0.10/lb
Total P0.46/lb
The materials price variance is assumed to be realized at the time of purchase.
Determine the following
1. material price, mix, and yield variances

2. labor rate and efficiency variances
3. factory overhead variances
Problem 6
Problem 7
variance
Problem 8
Problem 9
Problem 10

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Standard Costing

Costs Budget Actual

Direct materials (6 lbs. @ ₱6) ₱36

a. Actual production: 100,000 units

15. Calculate the fixed overhead rate.

Materials Inputs Standard Quantity Standard Price per Kilo Total

Materials Inputs Actual Quantity Actual Unit Price Total

20. What is the materials price variance?

23. What is the materials price variance?

Quantity Price Cost

Gumbase 800 lbs P0.25/lb P200

Corn syrup 200 lbs 0.40/lb 80

Sugar 200 lbs 0.10/lb 20

Input 1,200 lbs P300 P0.25/lb

Output 1,000 lbs P300 P0.30/lb

Opening Purchases Ending

The standard cost per pound of finished chewing gum is:

The materials price variance is assumed to be realized at the time of purchase.

Determine the following

1. material price, mix, and yield variances

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